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TMI Blog2019 (5) TMI 1697X X X X Extracts X X X X X X X X Extracts X X X X ..... the ratio laid down in the above decisions, direct the AO to restrict the disallowance equal to 30% of the total expenses Disallowance of trade discount and commission paid to VAV Air Conditioning a proprietary concern of the assessee s husband - HELD THAT:- We are of the view that the entire amount is paid to the sister concern without any deduction of TDS during the year and therefore as has been held by us in the ground No.1A (supra) the disallowance has to be restricted to 30% of the said expenditure. We are not convinced with the arguments of the ld DR that the genuineness of payments are in doubt as the payments were made to the related parties without proving the nature of services rendered. DR also stressed the point that reasonability of the payments is not the issue in this case but the allowability of the expenses u/s 37 is doubted by the AO on the ground of non rendering of services. However, we observe that the AO has not brought any materials on record to rebut the submissions of the assessee that the proprietary concern was a leading contractor and has been providing the information as to the requirements of the customers in that field on HVAC and air conditioni ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... xpenditure under various heads and to the payment of share of commission amounting to ₹ 480538/- (paid to VAV Air conditioning) and disallowing the said expenditure claimed by the appellant. 2. On the facts and in the circumstances of the case in law the learned Assessing Officer has erred in disallowing and the learned CIT(A) has erred in confirming the disallowance of the trade discount of ₹ 542350/- and share of commission of ₹ 480538/-allowed / paid to VAV Air conditioning. 3. On the facts and in the circumstances of the case in law the learned Assessing Officer has erred in applying and the learned C1T(A) has erred in confirming the application of the provisions of section 40(a)(ia) to trade discount of ₹ 542350/- and disallowing the same. 4. On the facts and in the circumstances of the case in law the learned Assessing Officer has erred in ignoring and the learned CIT(A) has erred in confirming the non consideration of form 26A u/r 31 ACB and the certificate of account in annexure A as provided u/s. 201(1) of the Act filed on record and in not holding that provisions of section 40 (a)(ia) as amended are applicable to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... owance by holding that the AO has rightly invoked the provisions of section 40(a)(ia) of the Act as the assessee has failed to deduct and deposit the TDS either during the financial year nor up to the date of filing the return of income. 7. At the outset, the Ld. Counsel of the assessee drew our attention to the explanatory notes to the provisions of Finance (2) Act, 2014, para 14.3 and 14.4 wherein the Ld. A.R. submitted that for the provision of section 40(a)(ia), Act has been amended to provide that in case of non deduction of tax on payments made to residents as specified in section 40(a)(ia) of the Act, the disallowance shall be restricted to 30% of the expenditure claimed. The Ld. A.R. submitted that the said provisions have been amended in order to ease the hardships caused to the assessee due to 100% disallowance of the expenditure claimed by the assessee in case of non deduction and non payment of TDS. The Ld. Counsel also submitted that it has been mentioned in the para 14.3 that withholding of taxes is a mode of collection of tax and does not result into final discharge of tax liability. The Ld. A.R. submitted that the case of the assessee is squarely covered b ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... gh it has been stated in the 2nd proviso to section 40(a)(ia) of the Act that the same is inserted from 01.04.2013 but the same has retrospective application as the insertion of 2nd proviso is declarative and curative in nature and would be effective from the date of main proviso to section 40(a)(ia) of the Act. We, therefore, respectfully following the ratio laid down in the above decisions, direct the AO to restrict the disallowance equal to 30% of the total expenses. The ground raised by the assessee is allowed. 10. The issues raised in ground No.1B, 2 3 are interconnected and are against the order of Ld. CIT(A) confirming the addition of ₹ 10,22,888/- as made by the AO towards the disallowance of trade discount of ₹ 5,42,350/- and commission paid of ₹ 4,80,538/-to VAV Air Conditioning a proprietary concern of the assessee s husband. 11. The facts in brief are that the AO after perusal of schedule 18 of tax audit report observed that assessee has shared commission income to the tune of ₹ 10,22,888/- with her husband Shri Adarsh Pal in the proprietary concern VAV Air Conditioning. Accordingly, the AO issued a show cause notice to the ..... X X X X Extracts X X X X X X X X Extracts X X X X
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